Quote from SK0:
Hi Jack.
What is Sector Rotation? Where could I find more info about it?
TIA.
- SK0
Most of the commnetary was before ET came on line.
The data feed is the IBD which uses 197 sectors. As is true of PVT trading, unusual volume gives a signal before there is any prive movement.
The parallel is sector rank and there are several fractals, meaning x. y. and z ranks according to weeks back for rank.
There are two analytical streams: sectors coming into favor and sectors going out of favor. As in sports a lot of energy is devoted to knocking off the top teams or top players. Think of walking a batter with a top avrage or fouling a poor foul shooter at the end of the fourth quarter.
There is also the "leader/lagger" element in picking sector stocks within sectors. The major aid for this handicapping is in stocktables.com. Two things become apparent: liquidity and sector. Hot sectors show up and their liquidity facet relates to the partial fill requirements.
The attached covers three ATS's and the five parametrs for each are mentioned: trading modus, upper limit of capital, upper limit of stream, partial fill max size and length of profit segment hold.
The next level of detail in SSR is that you make about 4% a week for the 4 to five weeks. Sector rotation is slow and it bears on econometrics primarily; that is direct, indirect, induced and substitution effects.
For example, to day in the banking sector there is the direct and substitution effect of getting new bank charters. Also the are things like indirect and induced effects of the IRS current training going on in the evaluator and supervisor levels. For one thing on these two levels they are required to acknowledge that they cannot understand financial stuff they are supplied if that is the case. Also the IRS congressional liason is required to keep legislators informed if the IRS staffing is screwing up AND the congressmen are the definers of how long the IRS has to get up to snuff. this means that those in given sectors sometimes get windfalls and they can move forward in significant ways over the first few weeks of their obtained advantages. And it goes the other way too. See the sectors that are being given new and stimulating tax advantages to get jobs created.
Sector Rotation has another characteristic that is very advantageous. It is in the herd activity level of consideration. when you pull up a sector of stocks and compare them you get to see them peeling off one after another as a phase change takes place in volume (liquidity). Phase change means an order of magnitude change in daily activity. This can also be seen in combo sorts of EPS and RS percentiles (IBD Data, again). It is like sleepy heads waking up and going from low volatility cycles to high beta cycles.
Also part of sector rotation considerations take into account the parallel shifts in PE ratios and even the "advent" of PE ratios.
Personally, I do some MA activity on occasion. Making money is a quarterly affair and it has to do with sectors as well. If you do TFSE or you mo9nitor such you see PE's quadruple in a year and that means a 100% a quarter price increase relative to the TFSE initial value for the first year. This is the letting it ride aspect of sector rotation. Look to the energy sector for this phenom, for example. At one time I did this with the stock that ws listed next to Apple. Because of the proximity, there were some nice pushes by the herd. The induced effect is that after the TFSE, the bottom line is goosed and the cost is about that of going to the mail box. This shows on 10Q's a quarter trailing.
Some nice exchanges are the Vancouver and the western US exchanges.
Lots of homework, I know. But it is inevitable as you use the weekly sweeping that is required.
Thanks for breaking up the monotonous humor
